How to invest a windfall

Only two years ago, Ian and Peter Collier were sheet metal workers in a factory and lived modestly in an end-of-terrace house.

Today, they live like celebrities, with a luxury home, expensive cars and take several exotic holidays a year. And it is all because of a £1 lottery ticket and six lucky numbers, which saw the brothers scoop £8.5m on Valentine's Day, 2004.

We cannot all win the lottery, but the expert advice that Ian, 60, and Peter, 48, received from the panel of solicitors, accountants and financial planners supplied by Camelot would be the same for anyone coming into a sizeable windfall.

Martin Stirling is a financial planner at national accountancy firm Grant Thornton, one of the companies on Camelot's panel, and the one that Ian and Peter turned to. Stirling says the first and most important thing he tells any lottery winner, regardless of the size of their prize, is to take their time and not rush into big spending or investments.

'It can be an emotional time,' says Stirling. 'Some people feel guilty and want to give away large sums straight away. But we advise people to park their cash in a private bank account while they take time to let the news sink in.

'After this, getting expert legal, tax and financial advice is vital. We educate people about the difference between good and bad advice.'

Ian and Peter say their initial meeting with advisers was invaluable. 'I realised we needed to get the best advice possible in order to make the most of our money and get it all properly invested,' says Ian.

The brothers, who no longer work, bought a £650,000 house in their home town of Milton Keynes, Buckinghamshire, and have spent about £250,000 landscaping the gardens and renovating a stable block in the grounds.

They have also splashed out on cars, including a top of the range Mercedes sports car and a convertible Aston Martin DB9. But despite enjoying their cash, and in particular indulging their love of travel and giving regular sums to charity, Ian and Peter have also made some sensible investment choices.

'We split each of our halves of the win and then have invested half in funds for growth and we are living off the other half,' says Ian. 'We imagine that in the future we will live off the investment, taking an income of perhaps £50,000 a year. But to date we have not had to dip into the invested portion.'

Julie Hedge, of independent adviser Christie Scott's in Reigate, Surrey, says people who receive a lump sum should consider all their options before acting. 'People who have large consumer debts such as credit cards, overdrafts, and personal loans, should clear those first,' she says.

'After that, depending on the size of the windfall, it may be an option to clear some or all of your mortgage. But there might be early redemption penalties, which can run into thousands of pounds, so homeowners must weigh up the pros and cons.'

Hedge says that when it comes to investing money the best strategy will vary according to an investor's attitude to risk. But generally, she says, it is important to have a balance of assets in an investment portfolio, including cash, equities and property.

'It is sensible to take independent financial advice before making any investment,' Hedge adds. 'A good adviser will ascertain your risk tolerance and work out a balanced portfolio to suit your needs.'

Stirling at Grant Thornton says it is also important to ensure that a will is written or updated. Inheritance tax planning is also a good idea.

This was one of the first things Dean and Wendy Nixon from West Butterwick, North Lincolnshire, made sure they did when they won £500,000 on the EuroMillions lottery draw in January last year. Dean, 43, Wendy, 42, and their two children Tara, 15, and Kurtis, 12, had an agonising wait after realising they had six out of a possible seven numbers the morning after the Euro draw.

'I checked our numbers early on Saturday and realised we must have quite a significant win, but there were 13 other winners, so I wasn't sure how much we might get,' says Dean, who runs his own security firm. 'I phoned Camelot at 8am, but the lines weren't open. It wasn't until 9am that I managed to get through. It was an exciting but tense time.'

After banking their cash and seeing a financial adviser, Dean and Wendy, a health and safety manager, updated their wills and discussed investment options. The couple have some money in cash and use their Isa allowances, but their dream was to own property overseas.

'We were already in the process of buying an apartment in Gran Alicante in Spain when we won the money,' says Dean

'We were able to clear our mortgage-as well as the one on the Spanish-property. We also managed to buy another, bigger, home in Spain.'

Including their own home, the Nixons own five properties. But they have stayed in their original home and kept the same jobs.

'We have enjoyed our winnings, but we were keen that life wouldn't change,' says Dean. 'We still have all the same friends and people really don't treat us any differently.

'We don't have any of the original cash winnings left in the bank, but we believe strongly in property investment and we see that as our retirement nest egg.'